USD/RUB drops to 2-week lows near 73.50 post-CBR

• USD/RUB extends losses to the 73.50 region.
• The Russian central bank (CBR) raised rates by 100bps.
• The CBR justified its move by rising inflationary concerns.

The Russian ruble gathers further traction and forces USD/RUB to ease to new 2-week lows in the mid-73.00s on Friday.

USD/RUB weaker on hawkish CBR

USD/RUB loses ground since Tuesday and navigates the area of multi-day lows near 73.50 after the CBR hiked the key rate by 100bps to 6.50% at its event earlier on Friday.

Higher-than-projected inflation and persistent high inflation expectations seems to have convinced the central bank to tight its monetary policy further, delivering a larger-than-forecast rate hike.

In fact, the central bank now sees inflation struggling to return to the bank’s target of around 4% in the second half of the next year and now projects the CPI to be within the 5.7%-6.2% range by year-end (from 4.7%-5.2%).

When comes to interest rates, the CBR now sees the policy rate to be between 6.5%-7.1% (from 4.8%-5.4%) by end of this year and within the 5.3%-6.3% band in 2022.

On another front, speculators trimmed their gross longs in RUB for the second session in a row, taking net longs to 4-week lows on the week ended on July 13. The Russian currency has appreciated since this week’s cut-off date (July 20) and ahead of today’s decision by the CBR.

USD/RUB levels to watch

At the moment the pair is losing 0.27% at 73.58 and a breach of 73.35 (50-day SMA) would aim for 72.03 (low Jun.25) and finally 71.55 (2021 low Jun.11). On the flip side, the next up barrier emerges at 74.30 (100-day SMA) followed by 74.74 (200-day SMA) and then 75.35 (monthly high Jul.8).